[aquaswim47]

Although you are going to need this money over 5 years, since it is not being spent tomorrow, it is my opinion that you can take a little risk with it. Not much, however. The following portfolio is highly conservative in nature and should do okay. More importantly, the TIPS investments also carry a risk of loss due to interest rate risk. If interest rates rise rapidly, you will see a loss in your portfolio!

Total Asset Allocation in $170K portfolio:

7.71% stocks; 15.68% bonds; 76.61% cash

Here's a portfolio that I would consider investing in if I had that money to pay for something like engineering school:

$45,000 in Savings at FNBODirect = 3.5%
$15,000 in an AmTrust 1 year CD = 4.15%
$15,000 in an OnBank 2 year CD = 4.3%
$15,000 in an Discover Bank 3 year CD = 4.6%
$15,000 in an E-Loan 4 year CD = 4.8%
Contribute $5,000 to I-Bonds; it's money that absolutely cannot be withdrawn "for any reason" for a minimum of one year. It's thus highly illiquid thus I indicated only to put $5,000 towards it at TreasuryDirect.gov.
$10,000 in 5 year TIPS

Source: BankRate.com

$25,000 in FASIX = 20% stocks; 50% bonds; 30% money-market
$20,000 in VASIX = 25% stocks; 65% bonds; 10% cash
$5,000 in VALIX = 62% stocks; 23% bonds; 15% cash

Total Asset Allocation in $50K portfolio:

26.2% Stocks; 53.3% bonds; 20.5% cash


The portfolio suggested above is a suggested portfolio only and you are solely responsible for your investing/savings decision. I am merely suggesting it in the general sense and don't know the specifics of your situation. With $170,000, it might be best to sit down with a Certified Financial Planner; a fee-only planner who can sit with you and discuss a plan. This, as any other investment, has a risk of loss.

The markets have an incredibly good valuation, but it's important not to have too much greed drive your decisions. Chasing yield on the TIPS may not be the best strategy since if interest rates rise, the prices of your bonds will fall.

Good luck and happy investing. Investing is a lifelong process, thus it's a good idea to get your feet wet and have a little bit of risk. It is my hope that the above portfolio is highly conservative, but there is no guarantee of that. Wish you well.